🍎 Why empty schools beat empty offices

👋 Happy Sunday, Best Ever readers!

In today’s newsletter, school is in, ROAD passes, concessions creep, malls heat up, absorption wins, and much more.

🚀 What if one conversation could change the trajectory of your next deal? That's what happens every week inside the Best Ever Inner Circle. This month, we're recognizing a member whose willingness to share practical advice has already helped fellow operators think differently about their deals. If you're ready to join a community like this, learn more here.

Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

🏛️ ROAD Passes: The 21st Century Road to Housing Act has become law without Trump's signature, capping corporate landlords owning 350-plus houses from buying more and easing manufactured home rules that could cut $5,000 to $10,000 per unit.

🎁 Concession Creep: Apartment concessions have reached 16.5% of stabilized U.S. units, according to RealPage, with the average discount hitting 11.1% of annual lease value — nearly six weeks free and the deepest in more than 25 years.

🛍️ Mall Momentum: Retail centers have posted three straight months of YoY visit growth, with open-air centers up 5.1% in June, and falling median incomes among visitors point to a broadening rather than narrowing shopper base.

🔩 Cost Squeeze: Construction costs have climbed above 5% YoY and could reach 8% by late 2026, as 50% Section 232 tariffs hold on steel, aluminum, and copper while 61% of U.S. metros face labor shortages.

⚡ Data Spillover: Data center tenants have driven more than 40% of new industrial leasing in the D.C. metro, up from 13% a year earlier, pushing Northern Virginia warehouse rents up 20% over three years.

🏆 TOP STORY
SCHOOL CLOSURES FEED A NEW HOUSING PIPELINE

The demographic forces emptying America's classrooms are handing developers the most workable conversion candidate on the market. Falling birth rates and the pull of charter and private schools have pushed public enrollment into a sustained decline, and the buildings left behind are centrally located, subsidy-eligible, and shaped far more like apartments than any office tower ever was.

Schools became the fastest-growing conversion type in 2024, when developers delivered nearly 2,000 apartments from former campuses — quadruple the prior year. The pipeline has kept expanding since, reaching 9,320 units at the start of 2026, up from 7,710 two years earlier.

The advantage starts with the floorplate.

• The Bones Beat Offices: Classrooms run close to apartment-sized, campuses sit centrally within established neighborhoods, and parking already exists. Tall ceilings, wide staircases, and oversized windows deliver light and volume that deep, dim office floors rarely can, and the historic detail carries rent-supporting appeal on its own.

• The Subsidy Stack: Historic-preservation and low-income credits carry the economics. A $40 million conversion in Charleston, SC, drew $24.4 million in federal and state low-income credits, $2 million from a state abandoned-building credit, $2 million in county funds, and a $4.5 million forgivable city loan.

• The Supply Behind It: Closures have spread from Philadelphia to Miami to Houston. Austin shuttered 10 buildings this school year, three are already headed toward housing, and a former elementary site is becoming 600-plus mixed-income units with priority given to teachers.

Community sentiment cuts the other way here, too. Residents want these buildings preserved rather than razed, so conversions tend to clear the local opposition that stalls other affordable-housing projects, trimming entitlement risk before a shovel moves. In Southbridge, MA, a shuttered junior high reopened in 2022 as 62 apartments, its old gymnasium now serving as the community center.

Not every campus works. Century-old buildings often need new mechanical and electrical systems, asbestos and lead abatement, and full code upgrades, while gyms, cafeterias, and auditoriums leave broad stretches of space that generate no rent. One Cleveland district found demolition cheaper than rehabbing a shuttered high school's aging infrastructure.

THE BOTTOM LINE

Enrollment declines are structural, which makes school closures a recurring pipeline rather than a one-time opportunity. Each shuttered campus arrives centrally located, subsidy-eligible, and physically suited to residential in ways office stock is not. The districts announcing closures now are drawing next year's adaptive-reuse deal map.

🌟 BEST EVER INNER CIRCLE
REAL OPERATORS. REAL INSIGHTS. REAL IMPACT.

Every month, we recognize an Inner Circle member who embodies what this community is all about: showing up, sharing generously, and helping fellow operators succeed.

🎉 Congratulations to our June Member of the Month, Odelia Zalayet of Goose Equity!

Odelia has been a consistent contributor in our strategy sessions, sharing practical insights on acquisitions, financing, capital raising, property management, and operations. She was also recognized for helping another member think through a creative deal restructuring strategy by suggesting a new investor share class as an alternative financing solution.

Want to Be Part of a Community Like This?

If you're an active operator or fund manager looking to raise more capital, source better deals, and surround yourself with experienced operators who openly share what's working, we'd love to talk.

Join by July 31 to:

• 🎟️ Lock in current membership pricing

• 📣 Receive a complimentary Best Ever newsletter sponsorship (a $6,000 value) to introduce your business to more than 50,600 commercial real estate investors

If you'd like to learn more or see if the Inner Circle is a fit, schedule a brief introductory call with our team today.

💰 CRE TRENDS
ABSORPTION IS OUTRUNNING THE SUPPLY WAVE

Apartment demand has kept beating the projections set against it. Net absorption topped 250,000 units in the first half of 2026 across both RealPage and CoStar datasets, down from last year's boom but still among the strongest first halves on record — and stronger than any full year before 2020.

Absorption outran new supply by roughly 100,000 units, letting occupancy claw back ground lost during the 2023–25 delivery wave. CoStar recorded a 20 bps improvement in stabilized occupancy in Q2 2026, the best QoQ gain since 2021.

• Household Formation Is Real: Rental economist Jay Parsons notes the absorption figure represents net new apartment households signing leases, not leasing traffic, with the majority spending roughly 21% to 22% of income on rent.

• The Recovery Is Incomplete: Occupancy and rent both remain below prior peaks, and much of the demand is being absorbed by newly delivered product still grinding through extended lease-ups.

• The Headwinds Persist: Choppy job numbers, a difficult market for recent graduates, and more young adults staying with parents all argue against the strength of these numbers, which showed up anyway.

Parsons cautions against treating the absorption run as settled, and against dismissing it. Correlation with heavy supply explains part of the figure, but new households still formed and signed leases regardless of what pulled them in.

Completions are falling off sharply this year. If absorption holds anywhere near its first-half pace, operators in the heavily supplied Sun Belt and Mountain markets could see modest pricing power return in the back half — the first real test of whether the recovery has traction.

🎓 BEST EVER LIVE EDUCATION
SESSION REPLAYS. AVAILABLE ANYTIME.

Capital raising. Tax strategy. Private lending. Underwriting. The topics that matter most to CRE investors are sitting in our webinar library right now, and every session is free to watch.

Recent replays include a deep dive on vertical integration as a risk-management tool, a breakdown of checkbook IRAs versus solo 401(k)s for real estate investing, and a session on private debt strategies targeting double-digit annual cash flow. Past sessions also cover capital-raising systems that scale beyond the founder, land entitlement as an underused return driver, and tax strategies most investors overlook entirely.

These aren't recycled webinars. Our partners bring operators and experts who've actually built the businesses they're talking about, and every replay is built to apply directly to your next deal.

No live attendance required. No scheduling around someone else's calendar. Just watch and learn.

🎙️ THE BEST EVER CRE SHOW
WHAT OPERATORS DO WHEN THE DEAL GOES BAD

The failures piling up in multifamily have exposed a second problem underneath the first — how operators behave once the numbers stop working. On the Best Ever CRE Show this week, Amanda Cruise and Ash Patel broke down what investor communication, cash calls, and fee structures reveal about which sponsors are built to last.

The trigger was a social-media-famous operator's public disclosure that he had lost $15 million of investor capital, a post many praised as transparent. Ash has read a stack of these letters, including one forwarded to him by several investors that announced zero return of principal while assuring them the sponsor would keep working occupancy through a 60-day foreclosure handoff.

• The Missing Line: Rates rose, cap rates decompressed, oversupply hit, rents fell. The explanations are always external, and Ash has yet to see a letter saying the sponsor royally screwed it up. Amanda frames the moment as the divide between operators communicating proactively and those pushing it under the rug.

• Cash Call Theater: Webinars pitching deals show the public chat. Webinars announcing cash calls route questions through a moderator, and the hard ones never surface. Amanda defends muting the room — a mob forms fast when investors are told their capital is gone — then argues the tough questions still deserve answers.

• Fees Without Skin: Sponsors saying they invest alongside LPs are often rolling the acquisition fee back into the deal as equity rather than writing a check. Ash points to construction and management "arms" that mark up third-party work with no way for investors to see it. Amanda notes those fees are usually already spent on salaries and marketing.

Ash's own structure defers fees until investors receive their principal back, which drew a comment asking how a sponsor keeps the lights on. His answer is that a first deal shouldn't need investor money to fund payroll. Amanda's read on the exit math is equally blunt: everything has to break right — rates down, rents up, occupancy up, cap rates compressed — for new money to recover anything.

👉 Listen to the full episode here.